IBM brings RFID to Volkswagen's entire supply chain

Rick C. Hodgin, 25th March 2009

Stuttgart (Germany) and Armonk (NY) - IBM and Volkswagen announced a plan yesterday to bring RFID technology to everything in Volkswagen's entire supply chain. Vendors will be required to tag every item they manufacture with RFID, or put every item manufactured in RFID-tagged containers. This process will allow inventories to be electronically tagged with far greater accuracy and speed.

The deployment follows a one-year pilot program of 3,000 shipping containers tagged with RFID, supplied by Intermec Technologies Corporation. The program was a significant success for the car maker.

IBM's Global Sensor Solutions executive, Kurt Rindle, said, "The pilot project has been ground-breaking. Volkswagen is driving innovation by becoming the first vehicle manufacturer to make daily use of RFID technology in the flow of materials between suppliers and the manufacturing line."

According to IBM:The information on the tagged containers is automatically collected by readers at all key locations throughout the supply chain -- first at the supplier's shipping department, through the transportation process until they arrive at Volkswagen, then during storage, collection and installation on the automaker's assembly line. The same process is used when Volkswagen returns the empty shipping containers to its suppliers to ensure that all containers are returned after the auto parts are received. The technology is also reducing the need for paper documents and barcode labels.

Klaus Hardy Mühleck, Group CIO and head of Group IT at Volkswagen, said, "Our long-term goal is to implement an integrated, paperless production and logistics chain throughout the whole Group. The pilot project showed that we can reliably integrate RFID technology into our business processes at a low cost."

RFID, or Radio-Frequency ID, is a passive system designed to broadcast a unique ID number or code when placed in close proximity to a power-source. Typically readable anywhere from a few centimeters to a few meters, the latest generation of RFID chips are smaller than a grain of sand. Each one contains an internal ID code created during the manufacturing process. The chip's ID number cannot be changed once it is created, and the only purpose of the chip is to broadcast that number when placed near the power source.

The power source uses magnetic pulses which cause a tiny amount of electricity to be generated in the chip, springing it to life. When it "comes alive" in this way, a simple computer program begins to send the code, typically 128-bits, which unique identifies the chips.

Since the 128-bit number is so large (3.4 x 10^38), it can be used on individual items without there ever being a duplicate number. This means every item on every Volkswagen can be individually tagged. And when applied to other future industries, every candy bar, every soda, every box of cereal, every package of meat, all of it can be uniquely coded and catalogued by RFID in a computer database.

Concerns over this practice relate to everything being tagged and identified by a purchaser at checkout, such that every detail of a person's consumer buying habits are entirely known.